In its quarterly economic outlook published this Monday, IBEC compares the evolution of food prices across the value chain over the first half of 2017. The business body notes that in the first half of last year, consumer food prices fell by 2.5% in Ireland while they rose by 2% in the EU.

“Looking at price dynamics along different stages of the supply chain, agricultural output prices increased by 7.9% in Ireland,” IBEC economists noted.

“Producer prices only increased by 3.4% despite the sharp increase in input costs,” they added – with “producer” meaning processor here.

“This suggests that both retailers and food producers are seeing their margins shrink in the current environment,” the analysis concludes.

Value share

This is the trend farmers and regulators would like to see confirmed, with recent moves showing appetite for European legislation to strengthen the share of food value returned to farmers.

The European Commission is expected to put forward legislative proposals in the first half of this year, following the recommendations of the agri markets task force in 2016 and a public consultation last year.

Exports and Brexit

IBEC also noted a 15.7% increase in food exports in the third quarter of 2017 – the fastest-growing category – adding that “the large increase in food exports was largely due to dairy products on the back of increased global prices”.

On Brexit, the group’s assessment is that “it is difficult, if not impossible, to square the UK commitment to avoiding a hard border on the island of Ireland with leaving the customs union and single market, while also ensuring Northern Ireland does not diverge from Britain. Yet that is the clear commitment that the UK has provided, including accepting a default to ‘regulatory alignment’ with the EU if no solution is agreed.”

IBEC warns that the challenge is now for the UK to deliver on this positive commitment.

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